Gold more than any other precious metal face wide price fluctuations from year to year. There are many factors affecting the price of gold (fundamental and psychological factors). The demand and supply of gold are changing due to variables such as government policies, currency volatility, and investment strategies. Gold has been a major performer over the last decade and the main reasons for that were: i) The global economic uncertainty (especially in US and Eurozone), and ii) The increase in demand from Asia (Jewellery and Investment Gold). Gold prices have increased from $300 per ounce in 2000 to $1,665 per ounce today (February 2013).
Chart: Gold Price 10-Years (February 2003-February 2013)
Gold Price 52Wk High 1,801.5 USD (-7.49%) |
Gold Price 52Wk Low 1,538.1 USD (+8.35%) |
20-Day Price Average 1,673.4 USD |
100-Day Price Average 1,712.0 USD |
Can Gold Remain Hot in 2013? -Some Insights from Expert Analysts
But can this gold rally continue in 2013? Can the gold price gets as high as 1,900 USD or is it time for a strong correction that can bring the price of gold even to 1,500 USD?
Many gold analysts argue that higher gold prices seem inevitable in 2013, and also they support that the lower end of the price range is fixed and reached already. Other analysts argue that the gold price has lost its momentum and that it is now far more expensive than other commodities.
Some Insights from Experts
-Goldman’s analysts support that the gold price rally will end in 2013, after peaking at about 1.850 USD.
-BNP Paribas is forecasting new price highs for 2013 and 2014 and an average price of 1.750 USD in 2013.
-The Bank of America’s research estimates an average gold price of $2,000 in 2013 and a strong move to $2,400 in late 2014.
-Barclays analysts are forecasting a gold price of around $1,800 in 2013, while they are expecting a US Dollar appreciation against Euro.
The Role of FED: High Inflation or Dropping Unemployment can Crush the Price of Gold
Historically, the price of gold is highly related to the FED monetary policies. If the US economy sees an inflation increase over 2.0% {1,7% today} or the unemployment ratio drops below 6.5% {7.9% today}, then FED is expected to raise US interest rates. According to that scenario, the US dollar is expected to get stronger and the price of gold will probably crush, even to 1,500 USD. Let’s not forget that the price of gold is measured in US Dollars and thus when the US Dollar gets stronger the price of Gold gets weaker. Furthermore, the level of US interest rates is highly affecting the price of gold, as it may motivate investors to sell gold in order to exploit high-interest rate returns.
The Supply of Gold in 2013 and the Role of China
The gold supply during the last two years was relatively unchanged causing no impact on the price of gold. As Societe Generale’s analysts argue, the supply of gold is expected to rise both in 2013 and in 2014. The reason for that is that gold production will rise in China significantly. China today is buying foreign gold mines, in the same way, that it does it for any other commodity that it needs. On the other hand, the consumer demand for gold is increasing in China, following the rise of middle-class incomes.
China Gold Reserves Relative to Other Economies
China’s gold reserves represent only 0.75% of China’s GDP in 2012. That same figure in the US is 2.95%, while it is 9.50% in Switzerland, 5.50% in Germany, and 1.75% in India. That is creating a long-term opportunity for the price of gold as increasing demand from China may push Gold prices to higher levels.
Final Conclusion:
The year 2013 seems to be a historic year regarding the long-term trend of the price of gold. If FED decides to continue its policy of easing the US economy, then we might see Gold Prices to new historical highs {1.900 USD per ounce in 2013 and 2,100 USD in 2014}. On the other hand if FED decides that the US economy is now strong and therefore increases US interest rates, then the price of gold will crush {1,500 USD in 2013}.
□ Giorgos Protonotarios
Gold Report
TradingCenter.org (February 8, 2013)
L MORE RESOURCES